Shell advances Penguins FPSO redevelopment in North Sea

Shell has reach final investment decision on its Penguins fields redevelopment in what will be its first new manned installation in the northern North Sea in almost 30 years.

The project will see a newbuild floating production, storage and offloading (FPSO) vessel used to redevelop the Penguins field.

A joint venture-owned/Shell-operated Sevan 400 FPSO has been selected as the development option for the field. Norway's Sevan Marine will design the unit and provide engineering support during the construction of the unit over the next 3-4 years. It will be the sixth Sevan Marine-designed cylindrical FPSO to be built. Engineering and construction company Fluor has been awarded the FPSO engineering, procurement and construction contract.

Penguins is in 165m (541ft) water depth, about 150mi north east of the Shetland Islands. Discovered in 1974, the field was first developed in 2002 and is a joint venture between Shell (50% and operator) and ExxonMobil (50%). The new FPSO will have a production capacity of 45,000 boe/d and will be able to store up to 400,000 barrels, says Fluor. The FPSO will be designed to operate continuously for 20 years without dry docking.

"The redevelopment is an attractive opportunity with a competitive go-forward breakeven price below US$40/bbl," Shell says. The FPSO is expected to have a peak production (100%) of circa 45,000 boe/d.

"Shell and Exxon taking final investment decision (FID) on the Penguins redevelopment in early 2018 is very positive for the North Sea, marking the end of an cautious era during the downturn," says Fiona Legate, senior research analyst, Wood Mackenzie. "The Penguins redevelopment is expected to produce around 80 MMboe. This is the largest FID since Culzean in August 2015 and shows market confidence has returned. We are expecting up 14 UK FIDs in 2018, Penguins is the second largest by reserves."

The Penguins cluster of fields currently comprises four drill centers tied back to the Brent Charlie platform. The redevelopment of the field, required when Brent Charlie ceases production, as part of the Brent field decommissioning, will see an additional eight wells drilled, which will be tied back to the new FPSO vessel. Natural gas will be exported through the tie-in of existing subsea facilities and additional pipeline infrastructure.

Oil will be transported via tanker to refineries and gas will be transported via the FLAGS pipeline to the St Fergus gas terminal in north-east Scotland.

Steve Phimister, Vice President for Upstream in the UK and Ireland said: “Having reshaped our portfolio over the last 12 months [including a $3.8 billion sale of assets to Chrysaor], we now plan to grow our North Sea production through our core production assets. In doing so, we will continue to work with the UK government, our partners and the regulator to maximise the economic recovery in one of Shell’s heartlands.”

Image: A Sevan-design FPSO, the Hummingbird, working in the North Sea.